‘Convenience Checks’ Are Favorite Target of Thieves

Consumer advocates and security experts are warning credit card customers to beware the flurry of so-called convenience checks that are about to arrive in their mailboxes.

The paper checks, sent by credit card companies, have become ubiquitous in recent years, particularly around the holiday shopping season as lenders vie for business.

Consumers can use them just as they would checks they receive for checking accounts at their banks. However, purchases made with the checks are added to the consumer’s credit card balance rather than being deducted from a checking account.

Some consumers find the checks live up to their name as a convenient way to make purchases or to transfer balances from one credit card to another, bankers say.

But thieves have made the checks a favorite target because they are much easier to steal and use than a credit card, security experts say. And even when properly used, consumer advocates warn, the checks are at best unnecessary and at worst an expensive way to borrow.

Sherry Franklin of Venice knows the dangers well. She says an acquaintance stole convenience checks issued to her last fall and used them to run up $8,000 in charges. Ever since, the physician has been battling her credit card company over the charges, which now are showing up on her credit report as overdue.

“I’m still in shock,” Franklin said. “I’ve never had bad credit before.”

Convenience check thefts and other credit card fraud are part of a growing tide of identity theft. Thieves bent on ID theft take over a credit account or use a victim’s identity to establish new credit, law enforcement authorities say.

Identity theft also is believed to have been involved in the Sept. 11 terrorist attacks. Several of those who hijacked the four doomed airplanes allegedly assumed someone else’s identity and opened accounts under those names.

The FBI estimates that 350,000 Americans were victims of identity theft last year. The Federal Trade Commission, which operates a consumer identity theft hotline, said it has been contacted by 86,683 victims since the hotline started in November 1999. About half reported some kind of credit card fraud, either unauthorized charges on existing accounts or new, fraudulent accounts opened in their names, said Monique Einhorn, an attorney in the FTC’s identity theft program.

No one keeps figures on how much of the theft is due to stolen convenience checks, but lenders and law enforcement authorities believe such theft is on the rise.

“It’s been a growth industry of fraud,” said Fritz Elmendorf, spokesman for the Consumer Bankers Assn., a trade group in Arlington, Va.

Still, most credit card issuers have yet to take the security steps used 10 years ago when organized crime rings made theft of newly issued credit cards a specialty, said Jim Gaughran, president of the International Assn. of Financial Crimes Investigators in Washington and a former Secret Service agent who investigated such thefts.

Today, credit card users must dial a toll-free number to activate a newly issued card. The issuers closely track the cards that are sent, following up with a letter alerting customers that the cards have been mailed.

Such precautions--and technology that helps merchants better identify stolen cards--have helped shrink the costs of credit card fraud. Visa USA, for example, reports its fraud costs have fallen from 18 cents out of every $100 spent by cardholders in 1992 to 8 cents today.

Convenience checks, however, don’t have the same security controls. Customers usually aren’t required to call a phone number to activate them, and lenders don’t follow up with letters, Gaughran said.

Thieves often steal the checks from unlocked mailboxes. Many lenders try to disguise the checks by not including the credit card company’s name on the envelopes, but the precaution does little to deter thieves, Gaughran said.

“Career criminals know what those [envelopes] are and what’s in them,” he said.

Other convenience check theft is a more casual crime of opportunity, with friends, relatives or household help stealing checks from inside homes.

In Franklin’s case, a former boyfriend made out the checks to himself and signed his own name. Franklin still isn’t sure how he got the checks, which were issued months after the pair stopped dating.

Once notified of the theft, credit card companies are required by law to investigate and remove any fraudulent charges from the customer’s account.

But many credit card users say they have been forced to battle their lenders for months to get the charges deleted.

In June, Michael Mazo of Saugus discovered an $800 charge on his credit card from someone cashing a convenience check. Mazo believes that the check was stolen from his unlocked mailbox on the rural road near his home.

Mazo said he mailed a dispute letter to the credit card issuer immediately, but it was three months before the company stopped its daily collection calls.

“It just went on and on,” Mazo said.

Convenience checks can be costly even when used properly. Many companies tack on fees of 2% to 3% when the checks are used to transfer credit card balances, or assess “cash advance” fees when the checks are used to make purchases.

Convenience checks may advertise low interest rates to induce customers to transfer balances, but the rates can shoot higher after a few months, or customers can face much higher rates on new purchases if they use the card to shop.

Convenience checks also are unnecessary, consumer advocates say, because consumers can transfer balances by phone and use their credit cards, rather than the checks, to make most purchases.

Shutting off the flow of checks can be difficult, however.

Although some lenders allow consumers to opt out of receiving the checks, others ignore customers’ pleas.

“I’ve tried, and they keep coming,” said Beth Givens, a consumer advocate and head of San Diego-based Privacy Rights Clearinghouse.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Where the Complaints Are

The Federal Trade Commission opened an identity theft hotline in November 1999 and collected the following information during 2000.

Targeted states

Among the 50 states and the District of Columbia, the following had the highest concentration of identity theft complaints per 100,000 population:

1. District of Columbia

2. Nevada

3. Arizona

4. California

5. Oregon

*

Targeted cities

Cities with the highest number of complaints:

1. New York

2. Chicago

3. Los Angeles

4. Houston

5. Miami

*

Suspect cities

According to information provided by victims, the largest number of suspects came from these cities:

1. New York

2. Los Angeles

3. Chicago

4. Detroit

5. Miami

Source: Federal Trade Commission

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Avoiding ‘Convenience Check’ Fraud

Convenience checks, issued by credit card companies, have become a favorite target of thieves. Here are some ways to avoid becoming a victim:

* Ask your credit card companies to stop sending checks. Many issuers will honor your request. If you want to find out about low-rate offers, ask whether you can be notified of such offers without the checks, or periodically call your lender to see whether you qualify for lower rates.

* Shred any unused convenience checks or credit card offers you are sent. You also can ask to be taken off many credit card companies mailing lists by calling (888) 5OPT-OUT.

* Get a locking mailbox. Many convenience checks and credit card offers are stolen from unlocked mailboxes.

* Open and review your credit card statements as soon as they arrive. To preserve your rights, federal law requires that you notify your credit card issuer in writing of any disputed charges within 60 days.

* Contact your local post office immediately if mail is missing. If you receive no mail for more than a day or two or if credit card statements or other financial documents are overdue, your mail could have been diverted or stolen by identity thieves.